John Paulson, who scored about $20bn (€13.4bn) of profits for his hedge fund between 2007 and early 2009 wagering against the housing market and financial companies, is launching a fund dedicated to buying up shares of gold miners and other bullion-related investments, according to three investors.

Paulson spoke about the new fund, which will launch January 1, at a meeting with his investors on Tuesday in New York. The gold fund will invest in gold-related shares and gold derivatives and will aim to outperform gold prices.

Paulson also has become a big fan of shares of Bank of America. In a letter to his investors, Paulson said he had a target price for the big bank of $29.81 by the end of 2011, according to an investor.

The letter said he was basing his view on the bank's recent earnings, not on a projection that profits would surge. He argued that loss provisions would drop and investors would pay a higher price/earnings multiple for Bank of America's earnings.

Paulson & Co. is already a major holder of gold shares, including AngloGold Ashanti Ltd and Kinross Gold Corp, doing most of its buying early this year. Paulson currently has more than 10% of his $30bn or so under management in gold-related investments, according to his investors.

Paulson also owns billions of dollars of gold exchange-traded funds and forward contracts that he uses for gold-backed investor classes of his various funds. These gold investments have benefited from the recent surge in gold prices to nearly $1,150 an ounce.

But investing in gold has become a conventional choice for investors worried about the values of leading currencies, including the dollar, on the heels of the huge amounts of money being printed and shovelled at various troubled areas of global economies. Gold's growing popularity raises questions about whether Paulson's increased affection for the yellow metal is misguided; the insurance he bought on sub-prime mortgages was a home run for him because it was selling at dirt-cheap prices when Paulson did his buying in 2006.

At the same time, the investments Paulson & Co. is set to buy for its new fund could be more volatile than overall gold prices, according to investors, so if gold falls the new fund could underperform.

At Tuesday's investor meeting, Paulson argued that the bull run was only beginning for gold; he said he was starting the new fund in part to give himself more personal exposure to gold. Paulson, who is estimated to be worth about $6bn, said he would himself invest as much as $250m in the new fund, according to an investor at the meeting.